It’s almost over. Tomorrow we can put paid to the nastiest, most deceitful and most decisive election since the Vice-President of the United States shot and killed the Secretary of the Treasury in a duel, 212 years ago.
Clinton v. Trump hasn’t quite reached that level, perhaps because duelling has been made illegal, but it’s not hard to image something similar happening. The level of animosity is unprecedented in the last two centuries.
But tomorrow night it will all be over. What is that going to do to the markets?
We don’t know who will win, of course, but we’ve got some ideas about what impact each of the presidential candidates will have on the market.
There are only guesses, remember, but there is some market logic informing them.
Today and tomorrow the markets will be bounced around by rumour and last minutes leaks. This will a speculator’s paradise, with every hint of news for either candidate pushing the market up or down. Unless you are in a position to monitor and trade the market tick-by-tick in real time, stay away from it. If past experience in any guide, some of the swings will be vicious.
After the day session closes on Tuesday and real news starts to replace rumour, traders will be active in the Globex futures markets, sitting in front of the consoles with one eye on the tickers and the other on the televised election returns.
In general, Clinton is the favoured candidate of the oligarchy and Wall Street, and as results come in that favour her, traders will start to move into the market, expecting a rally if she is elected.
One of the key states for her in Pennsylvania. If she wins there, and especially if she wins big, the guys working the trades will start moving in size, and we’ll be looking for a rally.
Trump is seen by the traders as a disruptor, the guy who wants to kick the cart over and set it on fire. They don’t know what a Trump victory would mean, but they don’t think it would be good, and if there are signs he could win, they will run for cover. The market is likely to dump on the prospect of a Trump presidency.
Trump has a much more difficult path to the White House, and a lot of things have to fall into place for him to win, but the State we’ll be paying most attention to is Florida. The Sunshine state isn’t necessarily a “must win” for Trump, but if he is losing there he is probably losing in other places he has to have.
This drama is unfolding in the context of a market that has been drooping for most of the last two weeks, and has broken some important support levels after failing to break out from a long topping pattern. We think a short-term correction has begun.
A Clinton win, and the usual end-of-year rally, might be enough to turn it around. A Trump victory will likely accelerate the decline.
For the S&P500 cash index (SPX) the major short-term resistance is at 2145-35. A move above that resistance zone will be first sign the current correction is ending.
Today
The ES, the S&P500 mini-futures contract, has suffered a succession of red days for the past two weeks but moved back up above the important 2100 resistance level in overnight trading Sunday after the FBI announced no charges will be laid against Hillary Clinton.
Today we’re looking for a bounce, but we don’t expect it to last very long. The volatility will probably be all over the place today and tomorrow. Once the storm clears, our guess is that the decline will continue.
Friday closed just a few points above the 200-day moving average; watch for a break below that level for a clue to the next move.
Major support levels: 2075-73, 2056-55, 2043-42, 2025-23
Major resistance levels: 2098-2100.50, 2112-14.50, 2123.50-25, 2152-55
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Chart: S&P500 (SPX) Nov. 4, 2016. Daily chart.
